S-08- Loss of Profits Insurance Mock Test 09

1. When there are two parallel claims (material damage and business interruption), what may insurers do regarding surveyors?

a) They always appoint the same single surveyor for both claims to save costs
b) Insurers may depute separate surveyors for the material damage claim and Loss of Profit claim as all surveyors may not be eligible to assess the LOP Losses
c) They require the insured to appoint their own independent loss assessor
d) They must wait for the material damage surveyor to complete their work first
e) Only the primary insurer can appoint a surveyor for both claims

2. Under the Failure of Public Utility Clause, what is the minimum waiting period (franchise period) before a claim becomes payable?

a) 12 hours
b) 24 hours
c) 36 hours
d) 48 hours
e) 72 hours

3. Business environment factors are described as very dynamic and ever-changing. Which of the following is given as an example of this?

a) A stable tax rate over many years
b) A company's internal HR policy remaining unchanged
c) A government regulation that never changes
d) A product that never changes in demand
e) The Spread of COVID-19 which affected businesses that were doing well before the pandemic

4. What are the consequences of rejecting an underwriting submission?

a) Rejections generate significant premium income
b) Rejections improve the claims ratio
c) Rejections help build the book of business
d) Rejections increase agent satisfaction
e) Rejections produce neither premium nor commission only expense

5. Under the MLOP policy, what is the treatment for coverage of manufacturers with multiple end products who wish to have LOP cover on output basis?

a) All manufacturers with multiple end products get automatic output basis coverage
b) For manufacturers having multiple end products, individual proposals must be submitted to the competent authority for approval before granting LOP cover on output basis
c) Multiple end product manufacturers cannot get MLOP coverage
d) Multiple end product manufacturers must use turnover basis only
e) Multiple end product manufacturers must have separate policies per product

6. What is item 20 in the examples of Standing Charges?

a) Expenses on guest house, gardening expenses, factory area and staff colony
b) Subscriptions to trade associations and Magazines, regular donations and charities
c) Repairs and renewals chargeable to revenue account
d) Salaries to permanent staff including Employees State Insurance Contributions
e) Provident fund, superannuation, family pensions, gratuity, perquisites, benefits, welfare etc.

7. What does successful underwriting require?

a) A system of risk selection to obtain a group in which loss results will be reasonably predictable by means of the law of averages
b) A system of premium maximization
c) A system of claim minimization at all costs
d) A system of rejecting all high-risk applicants
e) A system of accepting all applicants regardless of risk

8. In the example in Chapter 4, what was the net loss after fire?

a) Rs.1,00,000
b) Rs.5,00,000
c) Rs.10,00,000
d) Rs.2,50,000
e) Rs.50,000

9. What is the first benefit of reinsurance mentioned in Chapter 3?

a) Reducing the number of policies issued
b) Eliminating the need for premium collection
c) By covering the insurer against accumulated individual commitments, reinsurance gives the insurer more security for its equity and solvency by increasing its ability to withstand the financial burden when unusual and major events occur
d) By eliminating all catastrophic risks
e) By reducing agent commissions

10. In Case Study 7 (Increased Cost of Working), what type of business is affected and what was the ICOW arrangement?

a) A textile mill that rented an alternate spinning facility
b) A Cold Rolling Mill running on a 2500 KVA Captive Gen Set covered under MBD Policy with MLOP Insurance. After breakdown of 1500 KVA DG set, the insured arranged a Similar Gen Set on Rent of Rs.10,00,000 per Month. Even though there is no loss of production or turnover, the claim of the insured is still payable as ICOW is a built-in cover under the Loss of Profit Insurance
c) A retail store that relocated to a temporary premises during repairs
d) A software company that rented cloud infrastructure during outage
e) A hydroelectric plant that used emergency diesel generation